UPDATE 3-Key U.S. senator proposes program to purchase mortgages
Forbes - The initiative would start with a cash boost from taxpayers of up to $20 billion to purchase the first batch of failing loans and help underwrite the program proposed by Christopher Dodd, the chairman of the Senate Banking Committee. Foreclosures have

N.Z. Dollar Advances on Prospect Inflation Will Keep Rates High
Bloomberg - They’re still with a mild tightening bias,” stated Brendan O’Donovan, the chief economist at Westpac Banking Corp. in Wellington. The benchmark rate is 4.75 percentage points higher than the U.S. target, slashed by three quarters of a

BofA expands NASCAR banking program
MSN MoneyCentral - Bank of America Corp. has expanded its NASCAR banking program via licensing agreements with some drivers on the NASCAR Sprint Cup Series circuit. NASCAR drivers added to the bank’s portfolio include Bill Elliott, Dario Franchitti, Dale Jarrett, Mark

SVB Financial Group to Present at Citi 2008 Financial Services
MSN MoneyCentral - Offering diversified financial services through SVB Silicon Valley Bank, SVB Analytics, SVB Capital, SVB Global and SVB Private Client Services, SVB Financial Group provides clients with commercial, investment, international and private banking

Mexican banking official: Latin America will increasingly suffer from
CNBC - DAVOS, Switzerland - Latin American will increasingly suffer from the effects of a U.S. recession, Mexico’s top banker said Wednesday. Guillermo Ortiz, governor of the Central Bank of Mexico, said the impact of the global economic crisis so far has

Cascade Bancorp (Oregon) (Nasdaq: CACB) Released Results for the
MSN MoneyCentral - With uncertainty as to the depth and duration of the real estate slowdown and its economic effect on the communities within Cascades’ banking markets, no assurance can be given that the reserve will be sufficient in future periods. If the real

Cogdell Spencer Inc. Announces Merger with Marshall Erdman and
Forbes - A $100 million term loan arranged by KeyBank National Association with participation from Bank of America, N.A., Branch Banking and Trust Company, M&I Marshall & Ilsley Bank and Wachovia Bank, N.A.; — An $85 million rollover of

BancorpSouth, Inc. Declares Quarterly Dividend
Forbes - BancorpSouth, Inc., with total assets of approximately $13.2 billion, operates banking, insurance and financial service offices in Alabama, Arkansas, Florida, Mississippi, Missouri, Tennessee, Texas and Louisiana. SOURCE BancorpSouth, Inc. Copyright

Company paid twice for war support work
Miami Herald - A defense contractor hired to mend combat equipment routinely failed to do the job right and then charged the government millions of dollars for the extra work needed to get the gear ready for battle in Iraq and Afghanistan, according to a newly

Sovereign 4Q Net Loss Widens
CBS News - Today’s banking environment dictates proactive measures to strengthen capital and mitigate risk.” Sovereign has already stopped issuing auto loans in seven states _ Arizona, Florida, Georgia, Nevada, North Carolina, South Carolina and Utah _ as

Designer Valentino bids adieu to fashion
Miami Herald - Italian fashion designer Valentino, left, celebrates with French designer Emmanuel Ungaro after the presentation of his Haute Couture Spring-Summer 2008 collection, in Paris Wednesday Jan. 23, 2008. Celebrities, socialites and fashion editors prepare

Web voter registration still bogged down
MSNBC - SEATTLE - Arizona began allowing voters to register on the web in 2004. Three years later, Washington became the second say to do so. Given the migration to the Web of so many administrative tasks, like banking, what’s with the holdup in other states

Motorola, Capital One report profit drops
Newsday - Discussing the performance of its various business units, Capital One said its “local banking sector,” which includes North Fork and a Louisiana-based bank, earned net income of $111.8 million in the fourth quarter, down $78.8 million from the third

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Filed under: Private equity industry, Sallie Mae, $25b, 2007

Merger arbs are a key part of the M&A ecosystem. Basically, these are traders who assume the risk of buying shares in M&A targets, hoping to make a profit when the deals close.

Of course, during the boom times, this was a nice profit center for Wall Street.

But with the credit crunch, things have turned into a nightmare, as seen with botched deals for Harman International (NYSE: HAR), SLM (NYSE: SLM), and United Rentals (NYSE: URI).

In fact, according to a piece in the Wall Street Journal [subscription], it looks like merger arbs are thinking in terms of worst-case-scenarios. As a result, the spreads on deals (the difference between the buyout offer and the current stock price) have widened significantly, even for marquee deals.

For example, the spread on the Alliance Data Systems (NYSE: ADS) deal is $21 and the spread on the Clear Channel (NYSE: CCU) transaction is at $7.

Unfortunately, if some of these deals crater, we’re apt to see real damage. That’s, it will likely take quite some time for the private equity marketplace to make a comeback.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Deals, Private equity industry

Someone had to put together a list of LBOs that may fall apart because the stock markets are down. Leave it to the editors of The Wall Street Journal.

Making the hit list are Clear Channel (NYSE: CCU), Alliance Data (NYSE: ADS) and BCE (NYSE: BCE).

The newspaper is stating the obvious. The market already knows the deals are unlikely to close. BCE shares trade at $34, down from at 52-week high of $44.59.

The by-products of these problems are two-fold. The first is that LBO firms have obligations to shut some of these deals. That means that break-up fees or lawsuits might be on the way. Boards at these companies might have tiny choice if their shareholders are billions of dollars underwater.

The other factor is that trust in LBO firms will probably fall to all-time lows with public companies. Whatever happened to the “our word is out bond” stuff?

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Extracurriculars, Ripoffs and Scams

Players of the Second Life game may have lost up to $750,000 (real money) to people in the on the web game (pretend world). Second Life is an elaborate online game in which players have avatars (computerized dolls) that look like real people, and the avatars participate in a life that mimics real life… doing business, going to work, partying with friends, living with families, and more.

The players of Second Life can deposit real money into the game, which shows up as “Linden dollars.” They play the game, potentially opening businesses or working at jobs, and earn virtual money. They can buy real estate and pay for entertainment. But that money can be drawn back out as real money, so players can make or lose real money within the game.

Now the game has a banking scandal. Players of the game opened banks that other players could use in the virtual reality. But players complained because the banks didn’t pay the returns on the deposits that they promised. Players started withdrawing the real money from the game, but some have found that the pretend banks aren’t allowing them to withdraw their money. They’ve lost Linden dollars and real life dollars.

The people who run Second Life decided to shut down all the virtual banks. Many players aren’t sure whether or not they’ll lose their money, how much they lose, or whether action will be taken against the banks who owe them.

This bizarre online world clearly has the ability to cross from the virtual into reality. Real companies even pay for advertising in the game, believing that promoting their products in the game is a good investment. The good news? There are attorneys in Second Life, as evidenced by the Second Life Bar Association. Maybe they can start suing the avatars.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Record-keeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Headline news

Ahh, just in time for the 2008 U.S. Presidential elections, word surfaces that the standard of living in Britain is now higher than in the U.S. For a country that has prided itself on McMansions, luxury vehicles and overpaid jobs, the U.S. has been knocked down by those across the pond. Feeling sad, Americans?

Researchers at the Oxford Economics consultancy are now stating that variables such as free health care and increasing incomes are making Britons superior off than their American counterparts. When it comes to health care, this is no surprise.

47 million Americans don’t have health insurance and health care insurance premiums continue to be abhorrently high. While those that continue arguing about taking health care insurance public instead of private, about a sixth of those living in the U.S. live each day without that type of insurance. From this standpoint, those in the U.S. that do pay health insurance costs continually see price increases. Result: less money to spend elsewhere.

Those Oxford researchers also state the GDP per citizen figures are higher among Britons than Americans, and Britain’s continued financial market success has created a soaring housing market at the same time America is feeling a housing bust and a mortgage crisis created by greedy loan providers and ignorant homeowners. The researchers did say that British citizens may not feel more rich due to Americans having access to much cheaper goods. So, while Americans might make less, they can purchase more.

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Dell, Microsoft team up to sell (Red) personal
Reuters - Microsoft Chairman Bill Gates, who provided some of the seed money for (Red), defended the group, saying it has saved lives that would have otherwise been lost. “I guess you can criticize even life-saving activities. I don’t know how, but if somebody

Who’s Blogging
Washington Post - If you are thinking about the money you are investing today and you’re not going to be using it for 40 or 50 years, what happens in the course of a week or a month or even a year isn’t all that relevant,” stated Stuart Ritter, a financial planner with

Savient to Present at the 2008 Merrill Lynch Global Pharmaceutical
MSN MoneyCentral - For today’s top Money video click here News Providers Associated Press bizjournals.com Briefing.com BusinessWeek Wall Street Journal Savient Pharmaceuticals, Inc. SVNT this day announced that Christopher G. Clement, President and Chief Executive

AMD Unleashes the ATI Radeon(TM) HD 3400 and ATI Radeon(TM) HD
MSN MoneyCentral - For today’s top Money video click here News Providers Associated Press bizjournals.com Briefing.com BusinessWeek Wall Street Journal AMD AMD this day announced the introduction and availability of the ATI Radeon(TM) HD 3400 and ATI Radeon(TM) HD 3600

Everclear tickets reduced this day
La Crosse Tribune - If you want to save money on Everclear tickets, this day is the day. For this day only, a radio station promotion drops the ticket price to $18 for Thursday’s Everclear concert at the La Crosse Center. On Wednesday, the ticket price goes back up to $25

School Board asks for money from new TIF district
Rockford Register-Star - An unusual emergency interest-rate cut by the Federal Reserve gave Wall Street a partial rebound this day from a precipitious early decline — and perhaps the first steps toward a long-term recovery. The rest of the comeback, for the economy as well as

Cheer Up, Ben: Your Economy Isn’t As Bad as This One
Wall Street Journal - MORE FROM TODAY’S JOURNAL $ the popular fantasy game pulled the plug on about a dozen pretend financial institutions that were funded with actual money

Citigroup bonuses ‘flat’, even as job cuts loom
Daily Telegraph - Citigroup will hand out more than $11bn (£5.6bn) in pay and bonuses to its investment bankers today, roughly the same as You’re here: Telegraph > Money > Business

Your browser does not support frames.
MSN MoneyCentral - Frames are common today on many content rich web sites such as MSN Money. They are used to enhance page download time, site navigation and overall presentation of data leading to a superior user experience. Unfortunately, you’ll not be able to view

China and Brazil overtake oil multinationals
MSN MoneyCentral - For today’s top Money video click here News Providers Associated Press bizjournals.com Briefing.com BusinessWeek Wall Street Journal National oil companies from China and Brazil continued their relentless rise to power last year, pushing the likes

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